Buy Your Home Now
Now may be the BEST time to buy your first home.
As a real estate investor with rental properties who is currently looking for my own home, here are a few reason I think now is the time to buy. Especially if you are a first time home-owner.
#1. Banks are competing for you business!
If you are lucky enough to live in the Bismarck-Mandan area, you see it happening. Why own a burger joint when you can own a bank? In our metropolis, we have more than 20 banks to choose from for all your banking, investment, retirement, and insurance needs. What this means for us, the consumer, is these banks compete against each other to win your business. Promotions are happening everywhere. Free appraisals. No origination fees. $1000 credit to close. The list goes on. The brokers – mortgage originators who sell loans from many banks – can even offer as low as 1 percent down options!! The last time we saw mortgage rates like these was pre-2008. Like the commercial says, “when banks compete you win!” In this case winning could mean several thousand dollars less in down payments and closing costs for you the buyer!
#2. Prices are on the rise everywhere else
This may be a new topic for Millennials like myself, but inflation is real. Prices go up! Remember when you could get a whopper for $1 on Wednesdays? In recent news, President Trump proposed a 25 percent tariff on imported steel. According to my colleagues in the construction and remodeling industries, prices have already jumped! According to NerdWallet.com, in the past 10 years food prices have increased by 22 percent. Medical Expenses are up 34 percent. Sadly, income is up just 20 percent. That means even with steady pay raises, you have lost money eating and staying healthy. According to the Bureau of Labor Statistics, inflation increase just 2.1 percent annually. Other economists call into question that number but that’s not the point. If you want to enjoy a movie with your significant other including the popcorn and pop (soda for our non-Midwest friends) it will run you $45. Only a few years ago, maybe 20, that price was only $20. What this means for you, the soon-to-be home buyer, buy now when prices are lower. A home today will account for less of your monthly budget. Otherwise, you may have to settle for a smaller, older home that fits the banks numbers.
3. As interest rates rise, there are fewer affordable homes
The Dow Jones is on the precipice. In the next few months it could drop by as much as 40 percent according to Harry Dent. At the same time it could set a new high at 29,000 points. Depending which on the economist or TV pundit, multiple reasons are floating around regarding why the Fed raised the prime interest rate. What is the prime rate? “All types of American lending institutions (traditional banks, credit unions, thrifts, etc.) use the U.S. Prime Rate as an index or foundation rate for pricing various short- and medium-term loan products.” (fedprimerate.com). So, as the base rate for all banks, when the prime rate rises, so do all other new rates. That means the interest rate on your mortgage will be going up. For instance, a $200,000 house in Bismarck could qualify for an FHA loan at a 4.25 percent rate with a mortgage payment of $983.88. This doesn’t include private mortgage insurance (PMI) for simplicity. The same $200,000 house at 5.25 percent would cost $1,104.41 per month with no PMI figured. Same house, more than $130 more per month. The real kicker is you would pay more than $9,900 in extra interest in the first 5 years of the loan. It only gets worse from there, but most homeowners don’t stay in one home for 30 years. Most lending institutions follow guidelines from Fannie Mae and Freddie Mac which limit the total income a potential borrower can spend on a house. Interest rates change faster than the rate at which your income increases. This means step by step the dollars you can borrow are decreasing. It looks as if 3 more interest rate hikes are possible. This means three more drops in the amount of money a bank will lend you. Coupled with rising prices, affordable homes in decent shape may be harder to find – so start looking!
We all have different needs, but saving thousands of dollars is one we all share. Don’t sit on the fence about buying a home, Go for it! The road ahead looks pretty bumpy. Lock in a great 30 year rate, get a decent home and enjoy it. If you have any questions, please call your favorite banker and realtor to see where you stand. There are so many options available today. Make the most of them. I’ll see you at the open houses!
Contact Me Today
Let's find you the right home at the right price.